First, Acer introduced what it is touting as “the world’s thinnest ultrabook” (it will be interesting to see if Acer can still lay claim to that title by week’s end): The Aspire S5, which measures just 15mm at its thickest point. It weighs less than three pounds and comes with a 13.3-inch LCD display screen. It also comes with an interesting “MagicFlip” port panel that’s hidden below the hinge of the laptop. Users can open the hinge to reveal a panel of ports, including HDMI, USB 3.0 and a 20 gigabyte Thunderbolt port.

The Acer Aspire S5 Ultrabook

The Aspire S5 laptop has an Intel Core processor, a solid state drive, extended battery life and a chiclet keyboard. It’s expected to ship in the second quarter of 2012; the expected price is still TBD.

With its Aspire Timeline Ultra laptops, Acer says it is expanding on the Ultrabook it rolled out in September. The Timeline Ultra is available in 14-inch and 15-inch models; the laptops are 20mm thin, boast eight hours of battery life, have solid state and hard disk drive options, as well as HDMI and USB 3.0 ports. They feature an Intel Core processor. So again, not totally different from other Ultrabooks we’ve seen and are expecting to see more of. The Timeline Ultra does, however, have a DVD-Super Multi optical drive, which some Ultrabooks do not have, depending on their thinness and innards. The Aspire Timeline Ultra is expected to ship this quarter.

But Acer’s cloud service offerings looked a lot like a “me-too” to what Apple showed off at WWDC last June. Due to a technical glitch during the press event — and the greatest ironies of tech conferences, aside from dependably terrible cellular and Wi-Fi service, are the technical glitches — we weren’t able to get a good look at Acer’s cloud media service for syncing music and other entertainment files.

Acer’s PicStream (demonstrated via a slide that looked like Apple’s iCloud slide), promises to share photos seamlessly from smartphones to Windows-based PCs and other devices; AcerCloud Docs is designed for syncing and sharing personal and professional documents via the cloud (although it seemed Acer was mainly targeting professionals with this service). Acer stressed that these services will support Windows-based and Android devices.

Lastly, in an odd but not uncommon press conference move, Acer’s Campbell Kan quickly showed off one more tablet and offered just two bits of information about it — it has a quad-core processor and a 1080p display — before concluding the event. Last week, my colleague Ina Fried wrote about Acer’s efforts to remain relevant in the tablet market by introducing a budget-priced, 10-inch, Android-based tablet, the Acer Iconia A200.

MORE CES NEWS:

• Complete coverage
• HP’s Former CTO: Ultrabooks Are Nothing New, webOS Still Has Life Yet
• Walt Shows Off CES Gadgets for Fox Business News (Video)
• What Kind of Web Video Plans Does Sony Have? (Video)
• Fujitsu Seeking Way Into Crowded U.S. Smartphone Market
• Why Rhapsody Is (Probably) Bigger Than Spotify — In the U.S.
• Microsoft Beefing Up CeBit Presence Even as It Pulls Back on CES
• Inside the CES Lost & Found
• FCC Chairman Has New Tablet, but Same Script: More Spectrum!
• Verizon Wireless: We Want to Connect Five Devices for Every Subscriber
• Ultrabooks From HP and Lenovo That Are (Kinda, Sorta) Different
• Walt and Katie Take a Tour of CES (Video)
• Schmidt-Storm Alert: The Google Chairman Didn’t Like Your Question
• T-Mobile Expands Bobsled Messaging Service
• Intel Shows Just How It Plans to Get Into Phones (Video)
• Motorola CEO: We’re Going to Release Fewer Phones This Year
• Kinect Helps Keep Aging Xbox at the Top of Its Game
• More From T-Mobile CEO: On Pricing, LTE and That Ever-Elusive iPhone
• Exclusive: New Boss Acknowledges Windows Phone Still Has “Awareness Problem”
• And You Thought Jawbone UP Was Going to Miss the CES Party!
• Interview: T-Mobile CEO Says No Second AT&T Deal Out There
• Grover Is at CES and I Am Missing It
• BlueStacks Bringing Android Apps to Windows 8
• Why the Future of TV Won’t Be Here Soon
• Nvidia’s Tegra 3 Tries to Save Battery in All Sorts of Different Ways
• Dynamic Dual Coverage: Ballmer’s Last Act in Vegas and the BCS Championship in 3-D
• Microsoft Phoning In Its Last CES Keynote
• Myspace — Yes, Myspace — Says It’s Going to Sell You Web TV
• Samsung Unveils “Super” 55-Inch OLED TV
• Nokia Unveils That LTE Windows Phone It’s Been Dying to Share
• Steve Ballmer Gives Ralph De La Vega a Very … Vigorous Greeting (Video)
• Interview: AT&T’s De La Vega on LTE, Tablets and Life After T-Mobile
• AT&T’s De La Vega: Shared Data Plans Still in the Works
• LG: 55-Inch Glasses-Free 3-D Screen Is on the Way
• LG Pushes 4G Smartphone Through Verizon: The LG Spectrum
• Live: AT&T’s Vegas Act Stars LTE and, Making Her Return to the Stage, Nokia
• CES Notebook: The Constant Search for Power and Vegas’ Worst-kept Secret
• Belkin Bringing Mobile TV to Lots of Cellphones, Will Anyone Tune In?
• Acer Introduces “World’s Thinnest” Ultrabook and a “Me-Too” Cloud Service
• There Better Be Some Cool Stuff at CES, Because CE Holiday Sales Data Bytes!
• CES 2012: Snooki and Bieber Are In, Gaga Is Out!
• Coming to a Smartphone Near You: Gorilla Glass 2
• RIM Hopes Next PlayBook OS Will Impress at CES
• Ultrabooks, the Ultra-Fancy New Name for Laptops
• At CES, Expect More Gadgets Telling You to Get Off the Couch
• Intel to Detail Its Phone Plans at CES Next Month
• Microsoft Pulling Out of CES After Upcoming Show
• Intel to Detail Its Phone Plans at CES Next Month
• Dell Will Drop the Flashy Vegas Act for CES This Year
• Ultrabook Conga Line Preps for CES 2012

Motive

As the saying goes, people are motivated by either greed or fear. I think for many big companies, it’s more the latter. And Microsoft has a lot to be scared about.

If you poke behind its $71 billion in revenue and 39 percent operating margins, 30 percent of the goldmine comes from multiyear volume licensing agreements, which Microsoft calls Enterprise Agreements (EAs). According to industry analyst firm Forrester Research, “these profitable agreements bring in the kind of regular revenue preferred by financial-market analysts that monitor Microsoft’s performance.”

What motivates a customer to sign up for an Enterprise Agreement instead of simply buying Microsoft products, like Office, off the shelf? Well, historically, Microsoft pitched EAs as a way to ensure you can cover your workforce with Microsoft products at a discounted price level.

With companies investing in post-PC devices like smartphones and tablets, and evaluating alternatives to Microsoft productivity solutions, such as Google Apps or Salesforce.com, CIOs are starting to wonder whether renewing their EA is still a top priority.

In response to this threat, Microsoft is now pushing its Software Assurance (SA) licensing model, which allows customers to upgrade to newer products and also use its cloud services. The reason for the possible shift, Forrester says, is that “the twin revolutions of client mobility and cloud servers will kill device-based licensing, which is Microsoft’s existing model.”

So if Microsoft doesn’t embrace the cloud in a big way, the EA gravy train could come to an end.

Means

Apple is cool. Facebook is friendly. And Google isn’t evil. Yet look across a sea of computers in a typical company, and you’ll still see Microsoft everywhere.

And I’m not just talking about Windows. Microsoft has two key assets that will help it win the enterprise cloud:

• Office: While the Web and Web-based apps are fabulous for consuming content and even collaborating around it, Microsoft Office is still the standard in productivity to create corporate content. Love or hate those PowerPoint presentations, but they are still how most companies run. And for flexible analysis, Excel is unmatched. Heck, the Macintosh Business Unit at Microsoft (which is primarily Office for Mac) is a $350 million business on its own.
• Outlook/Exchange: For many workers, Microsoft Outlook (with Microsoft Exchange Server on the backend) is the first thing they boot up to start their workday, and the program they remain in all day long. According to industry analyst firm Radicati, 301 million corporate mailboxes used Outlook in 2010. Indeed, some companies have switched from Microsoft Outlook/Exchange to Google Apps and back, because users are too addicted to the interface and functionality of Microsoft Outlook.

So Microsoft still owns two of the key ways “knowledge workers” work with knowledge.

Opportunity

Microsoft isn’t working from a standing start. It actually jumped into the cloud relatively early in 2008 with its Business Productivity Online Suite (BPOS), a hosted platform for collaboration. While BPOS suffered from many challenges, mainly because it was based on a platform that wasn’t designed for the cloud, Microsoft made it clear several years ago that they are “all in” as a company in the cloud.

This year, after many delays and much anticipation, Microsoft finally announced its first platform built for the cloud, Office 365. The new version of Exchange is finally on par with its on-premise alternative. Microsoft SharePoint Online is now flexible enough to meet many enterprise use cases. And Microsoft Lync Online, a real-time chat and videoconferencing system, could be a game changer for company productivity.

In parallel, Microsoft is working away on Windows 8, its big bet on the tablet revolution. With all of Microsoft’s failed past attempts at mobility and tablets, some level of cynicism is expected. But some believe Microsoft’s conviction is real. If Microsoft even gets it 80 percent right on tablets, they will likely win in enterprises that are used to the manageability of Windows, and will be attracted to the inevitably deeper Office integration.

Conclusion

Don’t get me wrong: The innovation in the cloud is coming from all over, mainly from start-ups. For many of these start-ups and other non-enterprise organizations, a non-Microsoft approach will likely be the winner. But for the millions of you working in corporate America, Microsoft is probably the one bringing the cloud to a desktop near you.

Nick Mehta is CEO of LiveOffice and has served in senior operating roles in the enterprise and consumer technology markets for much of his career. He spent more than five years at Symantec Corporation and Veritas Software Corporation (now Symantec), where he served as vice president and general manager of the Enterprise Vault information archiving and discovery software business.

If I upload my music collection to Apple’s iTunes Match cloud service, is it deleted from my computer? I ask because I wouldn’t want to lose my music if the service was killed or suffered some massive failure.

A:

No. Any songs that currently are stored on your computer’s hard disk remain there, so even if iTunes Match is discontinued, your music is safe. However, you will gain access from the cloud to additional songs that live on other computers or Apple devices you own, but now are also stored in your iTunes Match account.

Q:

I am considering buying the 10″ Toshiba Thrive tablet you reviewed a while back. It comes in three memory configurations. Other than the amount of internal memory, do the three models have the same internal hardware?

A:

Yes. A glance at the Thrive website suggests that all other key components, such as the screen, the processor, the ports, the sensors and the cameras are the same. For more, see http://bit.ly/vvy2rM.

Q:

I just got an iPad 3G with Verizon. I want an all-in-one printer, but it seems I need a Wi-Fi connection to use a printer. Is something available that would work with my Verizon connection?

A:

There are some iPad apps that claim to print over 3G. Just go to the app store, search on “print,” and study the descriptions.

But it doesn’t matter, because every iPad, including those like yours that come with 3G, also includes Wi-Fi, and can print to compatible printers. The Verizon 3G is an added, alternate connection capability—not a replacement for Wi-Fi. Just make sure when you buy your printer that it’s compatible with Apple’s AirPrint technology. More information is at http://bit.ly/r2A5VG.

That means that high-performance games, previously only able to run on top-notch hardware, will now be able to stream over the Internet to comparatively low-end mobile devices.

The Palo Alto, Calif.-based company has been selling its gaming service for a little more than a year. Up until now, consumers could stream games to their TV, or to a PC or Mac. The games can be purchased, rented for a few days or paid for via a monthly subscription. The mobile version will work the same way.

The apps will be available as soon as today in both the iTunes Store and the Android Market in the U.S. and the U.K. The app will also be coming to other devices, include the Kindle Fire.

OnLive founder and CEO Steve Perlman said an iPad would never have enough memory to play a 10 gigabyte game.

But OnLive’s service works because the game runs on the company’s server and then streams a compressed version to the device. The service is so efficient, in fact, that it will work not only on Wi-Fi but also on high-speed 4G wireless networks, like AT&T’s or Verizon’s LTE. OnLive worked closely with AT&T, which is one of its investors, to ensure its service would operate seamlessly.

At launch, the mobile app will have a catalog of about 25 games, including one of this year’s top sellers, Rockstar’s L.A. Noire, which is a 1940s Hollywood crime thriller.

Perlman said three categories of games will be available on mobile devices. The first category will be games like L.A. Noire that have been adapted to use the touchscreen. The second will be games that will use a virtual controller that appears on the tablet’s screen. And the third category will require an OnLive wireless controller, because the games require too many buttons to control. The controller will cost $50.

The number of games that have been fully adapted will be limited initially, but nearly all of OnLive’s 200 titles will be playable on a mobile device in some manner.

Because OnLive’s service is stored in the cloud, users will be able to pause a game on one platform, and then pick up on a mobile device where they left off.

One inconvenience of the iPad app is that all games will have to be bought on the PC, because of Apple’s policies on in-app purchases.

Perlman said it’s unclear what the demand will be for a mobile service like this, but that it has the potential to disrupt the way console games are traditionally sold.

“Before OnLive, games were a form of software and a type of application,” he said. “They were subject to piracy and hardware requirements, but now it’s music or movies. It doesn’t matter what the performance of the device is.”

Taleo’s CEO, Mike Gregoire, has been in this position before. As executive vice president of Global Services for PeopleSoft, he lived through Oracle’s hostile acquisition of that company. In an interview with AllThingsD, he didn’t comment directly on the speculation that Oracle might make a bid — Oracle hasn’t hasn’t said anything on the subject, either — but it was clear that he didn’t exactly seem to relish the thought, either. Having run $2.3 billion of PeopleSoft’s $2.7 billion in revenue, he was with that company “until the bitter end,” he told me.

After a stint as an angel investor and sitting on the boards of a few companies, Gregoire decided he was “more of an operational guy.” He joined Taleo and took it public in 2005, and has been at its helm since then. Taleo was at that time the second cloud-based software company to go public after Salesforce.com. It was so early for software-as-a-service (SAAS) companies, where customers pay a subscription fee to use the application, that when he approached banks for some financing, upon hearing the word “subscription” they would initially compare it to a magazine. Eventually they understood, and Gregoire got his loan. Now some of those banks are his customers.

Cloud-based enterprise software companies are suddenly hot acquisition targets. Aside from the SAP-SuccessFactors deal, Oracle acquired RightNow in October. As a growing cloud-based rival to SuccessFactors, with a protein-rich customer base, a solid operating model and an affordable market capitalization of about $1.6 billion, Taleo’s shares have shot up on speculation that it could be next.

On Dec. 2, the day before the SuccessFactors deal, Taleo shares closed at $32.96. On Dec. 5, the first trading day after the deal, Taleo rose almost 20 percent to $39.50. The move by SAP — long a vendor of traditional on-premise business software — to embrace the cloud-based or SAAS model is an important acknowledgement that the business of selling business software is fundamentally changing, Gregoire says. Indeed, it’s a fact that SAP’s co-CEO Bill McDermott acknowledged even before bidding on SuccessFactors.

And it’s hard to argue that Taleo (pronounced Ta-LAY-oh) isn’t making an impressive showing. The company has been growing its sales at between 17 and 20 percent since since 2008, and it’s on track to hit $325 million in sales this year, up from $237 million last year. It has 5,000 customers, including 180 of the companies on the S&P 500, and its product is available in 38 languages.

Naturally, my first question for Gregoire was about his thoughts on the SuccessFactors deal.

AllThingsD: Mike, it has been a busy few days since the SAP-SuccessFactors deal was announced. What did you think of the deal? And what, if anything, does it mean for Taleo?

Gregoire: I think it started a few weeks earlier, with the Oracle RightNow deal. It’s a confirmation that the on-demand model is moving into the next phase of its adoption. We’ve got 5,000 customers. We’ve been the No. 1 on-demand player in the enterprise. No one has as many Fortune 100 customers as we do. We drive the second-largest number of transactions volume of any on-demand player. It kind of felt like we had been pushing this rope, trying to get people ready for that next phase of adoption. So Oracle and SAP are acknowledging that the on-premise solution is running out of gas, and they need to augment that solution with some off-premise cloud solutions. Second, it’s important that SAP has recognized that talent management is extraordinarily important, and it complements a back-end Enterprise Resource Planning (ERP) system. Taking care of people helps your company grow, and without it, your company is at a competitive disadvantage.

A lot of people look at the the phrase “talent management” and think it’s kind of specious — or even boring — software that only the human resources office needs. What does it mean?

If you want to talk about an application that moves the needle for business performance, there’s nothing better. The No. 1 expense in businesses is people. We see the news about the unemployment rates, and then we see that companies can’t hit their productivity goals because they don’t have the right people in the right jobs. Its absolutely crazy. That’s the problem we solve. Talent management is about getting the right people into your company, having them work on the right things, because you’ve got performance goals, measuring those goals, tying that to pay-for-performance and compensation. And, by the way, the chances that person has the right skills at the right time is about zero, so you want to tie those goals to a learning management system, and making that happen in real time, and then providing intelligence about the whole ecosystem of employees. That moves the needle with respect to business performance.

What’s a classic example of this software in action?

I’ll talk about SunGard, which is a customer of ours. They use an Oracle ERP system, and they use our learning management systems. Let’s say you’re a SunGard sales rep and you just got promoted. The day that your promotion goes through in the ERP system, it kicks off a transaction in our learning system that checks your history to see what courses you’ve taken and whether you’ve got all the certifications you need. And then it automatically builds out the courses you need to take to be successful in your new job. We also do succession planning. And the days when you’re only going to consider people inside your company are over. You’ve got to think broader than that. United Airlines, which is a customer, when they think of succession planning, they’re not only thinking about the 200 high-potential individuals within the company. They’re talking to people in the industry so they can take a look at the people inside and outside the company and consider different scenarios. Our application is graphical, so you can drag people around in a visual tree and see what each scenario looks like. And then you can save them for later, so that if someone gets promoted, fired, or leaves the company for another job, you’ll know what to do, should any of those three things happen. Most people do this sort of thing in their heads.

How do you think Taleo stands up against SuccessFactors competitively?

Going forward, we’ll have to see how that works out. [With] due respect to what I’ve read about the deal in the press, I don’t think the integration with SAP is going to be a walk in the park. There’s at least seven platforms in SuccessFactors. And in this deal, you have two companies who have struggled to do SAAS at scale. SAP doesn’t have a very good track record executing on SAAS. They spent a lot of money building Business ByDesign. Rumor has it that SAP spent as much as $500 million building it. Their track record has been very marginal. The same is true with SuccessFactors. They’ve done a good job with one product that’s on an old platform for between 5,000 and 10,000 employees. They don’t have a good track record in the upper end of the enterprise, and they haven’t been able to get revenue from outside of their core, which is performance management. They went and bought a company in learning management. We’re dominant in recruiting; they’ve been trying to build a recruiting engine for five years. I don’t know that they have any significant reference customers on that yet, but they should have some soon, because they’ve been at it for so long.

So why did SAP buy SuccessFactors, then? Was it for the customer base?

SuccessFactors has a pretty small customer base. We’ll know more after they publish the 10-Ks and 10-Qs, so we’ll see more of where the synergies really are. But the synergies that have been reported is they want to be able to take the SAP technology and repurpose it into the SuccessFactors stack, which sounds expensive and time-consuming, and then take that stack and combine it with Business ByDesign and compete with Workday. We work pretty closely with Workday, and often go in with them shoulder to shoulder on deals when a customer needs recruiting and learning. And they use our recruiting products.

So, let’s handle this one piece of business. I’ve seen no fewer than five analyst reports saying you’re going to get taken out by Oracle. Have you been contacted by Oracle, or anyone else, about a possible acquisition?

We don’t comment on that kind of speculation. But a first-year MBA student could connect those dots. We’re positioned to be the only independent full-suite SAAS player in the market right now, and that’s a good place to be. How everyone reacts to that, I can’t control. But we’re on track to do $325 million in revenue this year, and we’re growing at about 20 percent per year. We have 12 percent operating margins. Who else has that? We’ve not only figured out how to do SAAS at scale, but we’ve done it profitably. And we continue to innovate. That’s where we want to be.

What are your priorities for 2012?

Three things. Selling back into our customer base. Most of them came to us for our recruiting heritage. If you take a look at last quarter alone, 36 percent of our net new bookings were in products other than recruiting; we’ve been reporting that number every quarter. So there’s a big push to sell our other products into our existing customer base. Second is geographical expansion. We bought a company in France that effectively doubled the size of our European salesforce. Despite what you hear going on Europe, they are not going to spend as much on technology in 2012 and 2013. If they are going to spend any money, it’s not going to be on upgrades of perpetual software licenses. I think they will spend it on SAAS, and I think Europe is generally way behind on SAAS. If I were to tell you our biggest deal last quarter was going to be a seven-figure deal with a Swiss bank, you would have said I was crazy, and that it would never happen. But it did. The reason it happened is that SAAS is orders of magnitude cheaper than paying maintenance fees on perpetual software licenses. The same thing happened with Société Générale, the French bank, which stopped an upgrade of either Oracle or SAP midstream, and they went with us. There is definitely room for SAAS in Europe, and there will be more room for SAAS in Europe in 2012; I think we’ll be a net beneficiary of that. Third is innovation, both organic and inorganic. We’ve been acquisitive, and every transaction we’ve done has been accretive and has worked out well. We’re good at either buying technology or customer bases and integrating them very quickly. Organically, we’ll be doing a lot of work on mobile and social features.

Today, Cisco finally laid out a cohesive strategy to become a significant player in the cloud business. It announced an offering called CloudVerse that combines three big elements — its Unified Data Center, Cloud Intelligent Network and Cloud Applications — into a big portfolio aimed at companies building out their data centers.

The idea is basically this: If you want to build a cloud, either to resell cloud services of some kind or for your company’s own internal operations, Cisco wants to talk to you. Under the CloudVerse tent are a bunch of offerings including computing, networking, collaboration and software for automating and managing it all.

Cisco named a handful of companies who are already CloudVerse customers, and a few will catch your eye, because they’re big. One is Terremark, the Web-hosting and cloud-services outfit that telecom giant Verizon acquired earlier this year. Others include Telecom Italia, Telefonica Spain and Fujitsu.

Naturally, Cisco is hoping to use its position as the supplier of choice for networking gear as a springboard into selling more stuff inside the data center, and it already has key relationships with many a corporate CIO. A key part of its go-to-market strategy will be convincing those CIOs that it has something unique to offer.

Here’s one such thing: The Network Positioning System and Cloud-to-Cloud connected. Imagine you have a sprawling set of far-flung data centers around the globe. When one center gets starts to get close to reaching its capacity load — maybe it’s Cyber Monday or something — Cisco’s NPS technology allows the routers in one data center to start automatically looking around for capacity elsewhere, to keep things humming along.

There’s a lot more detail to it, but it’s worth pointing out that, as a percentage of Cisco’s business, the cloud business isn’t huge. On an earnings conference call with analysts last month, CEO John Chambers said that the Unified Computing System that forms the backbone of its server business had recorded 116 percent revenue growth year over year; even with that, it’s on run-rate to being a $1 billion annualized business. If it hits that mark in Cisco’s fiscal year 2012, which ends in July, it will amount to about 2 percent of estimated annual sales.

But Cisco expects the cloud business opportunity to grow like crazy. Last week, it issued something called the Cisco Cloud Index, which estimates that more than half of all computing workloads will be running in data centers by 2014, and that the daily traffic conducted on cloud services of various types will amount to 1.6 zettabytes per year. My math may be off a bit, but compare it to the scale of your average hard drive — a zettabyte amounts to a billion terabytes, or a trillion gigabytes. Cisco describes it as enough data to amount to four days of high-quality video streaming for every person on Earth.

It’s a serious opportunity, no doubt. The question is whether or not Cisco can exploit it in a manner that moves the needle. Doing so is an important part of the strategy that Chambers set forth as part of the epic restructuring that has been going on at Cisco since last year. Investors seem to like what they see, as Cisco shares are trading at $18.80 today, which is up 41 percent from a recent 52-week low. As turnarounds go, it does look like progress.

The traditional narrative of cloud companies like SuccessFactors, NetSuite and Salesforce.com has looked a little like this: Scrappy cloud upstart aims to change the established way of doing things and paints a target on the established, big software company that controls the marketplace. Said upstart systematically goes after its customers, starting with the smaller ones. Big company pretends not to notice.

SAP has regularly been portrayed as the villain in that story. Talk to any vendor of cloud-based software that’s aimed at running some aspect of a business, and it doesn’t take long for the founders to start talking about SAP as the company whose business they would most like to disrupt.

The part of the story that hasn’t played out yet, but which appears to be starting, is that eventually the big companies do notice, and when they do, they start buying. SuccessFactors is the second acquisition of an enterprise cloud software company in as many months. The other was Oracle’s $1.4 billion deal for RightNow.

The first and most obvious thing that’s going to result from the SAP deal is that speculation will surge about another, similar deal. Already this morning, analysts at BMO Capital have upgraded Taleo, a SuccessFactors rival, on the theory that it is now in play and that Oracle is the most likely buyer. Taleo specializes in cloud-based talent management software, and is about the same size by revenue as SuccessFactors. Publicly traded since 2005, Taleo saw its shares close Friday at $32.96, within 13 percent of its historic high of $37.10, giving the company a market capitalization of about $1.4 billion and making it a relatively easy target for Oracle and its $32 billion war chest. BMO boosted its price target on Taleo shares to $40 from $28.

Another one to watch is Workday, yet another provider of cloud-based human resources software, which last month raised $85 million at an implied valuation of $2 billion as warm-up for an expected IPO next year. It’s on track to do about $320 million in billings in 2011, and is nearing profitability.

Another company that will probably be considered for takeout is NetSuite, the company that specializes in cloud-based software for running a business. Trading as of Friday at a valuation just shy of $3 billion, it could be a takeover target, too, though its business is humming along just fine. It’s on its way to closing the year with sales north of $235 million — much of that derives from taking customers away from SAP.

NetSuite CEO Zach Nelson said the SuccessFactors deal basically confirms that Netsuite’s approach has been the right one all along. “It’s far more beneficial for NetSuite than it is for SAP,” he told me by email over the weekend. “With this acquisition, SAP has told their customers that the path NetSuite pioneered a decade ago is the future, while the acquisition does little to advance their own product architecture.”

Which raises another question: What will this deal do for SAP? In the plus column, it makes SAP a share-gainer and not a share-loser in the $13 billion talent management software business, and improves its competitive stance against Oracle, says Brian Schwartz, an analyst with ThinkEquity, in a note to clients today.

In the negative column, SAP has spent about half of its cash — as of Sept. 30 it had €5 billion ($6.8 billion) in combined cash and short-term investments — to acquire a company that amounts to less than 4 percent of its revenue. SAP will have to struggle to get SuccessFactors to scale up to the point that it moves the needle. Even SAP co-CEO Bill McDermott concedes that it will take awhile, telling Bloomberg News that SuccessFactors could add €1 billion in incremental revenue — by 2015.

Or maybe buy a tiger. Today SAP said it will pay $3.4 billion to acquire SuccessFactors, a cloud-based maker of human-resources software. The deal values SuccessFactors at $40 per share and works out to a premium of about 53 percent. SuccessFactors shares closed at $26.25 a share on Friday. The shares have fallen by more than 9 percent this year, but traded as high as $40.27 a share during 2011.

SuccessFactors’ software is a cloud-based suite of tools around managing various personnel issues in a business: Performance management, goal setting, managing compensation and even planning for succession among senior managers. Its also has a pretty rich set of customers for so small a company: Among them are chipmaker Advanced Micro Devices, cable giant Comcast and hedge fund BlackRock. The company has about 15 million active subscription seats, and boasts in its earnings reports about one customer in Europe that has 400,000 users and another in the U.S. with 2 million.

The company reported $205 million in revenue in 2010 and a GAAP loss of $12.5 million, but a 7-cent per-share profit on a non-GAAP basis. It was on track to do $330 million or more in sales in 2011.

What’s it mean for SAP? Basically SuccessFactors gets integrated directly into the SAP Business ByDesign portfolio that McDermott talked about. SAP says in its statement that the deal will be paid for with cash on hand, and by a 1 billion euro loan facility.

The question I have now is this: Is this the starting gun for a new round software acquisitions? There are numerous cloud-based enterprise application companies out there. Among those that come to mind are Netsuite, Taleo, and Workday, to name but a few.

The SAP statement is below.

WALLDORF, Germany and SAN MATEO, Calif. , Dec. 3, 2011 /PRNewswire/ — SAP AG and SuccessFactors, Inc. today announced that SAP’s subsidiary, SAP America, Inc., has entered into a definitive merger agreement with SuccessFactors, the market-leading provider of cloud-based human capital management (HCM) solutions, pursuant to which a subsidiary of SAP would offer to acquire all outstanding shares of common stock of SuccessFactors for $40.00 /per share in cash, representing an enterprise value of approximately $3.4 billion . The acquisition will add SuccessFactors’ widely respected team and technology to SAP’s powerful cloud assets, significantly accelerating SAP’s momentum as a provider of cloud applications, platforms and infrastructure. The combination of SAP and SuccessFactors will establish an advanced end-to-end offering of cloud and on-premise solutions for managing all relevant business processes.

The SuccessFactors board of directors has unanimously approved the transaction. The per share purchase price represents a 52% premium both over the December 2nd closing price and the one month volume weighted average price per share. The transaction will be funded from SAP’s cash on hand and a euro 1 billion term loan facility. The closing of the tender offer is conditioned on SuccessFactors stockholders tendering at least a majority of the outstanding shares of SuccessFactors common stock (on a fully diluted basis) and clearances by relevant regulatory authorities. The transaction is expected to close in the first quarter of 2012 and be slightly dilutive to SAP’s Non-IFRS earnings per share in 2012 and accretive in subsequent years.

The acquisition marks another stride in SAP’s strategy of delivering solutions on premise, in the cloud and on mobile devices. It builds on a series of strategic moves in SAP’s targeted growth areas to drive innovation in its core applications and analytics; introduce breakthrough in memory technology; establish leadership in enterprise mobility; and grow its cloud portfolio. SuccessFactors’ solutions are highly complementary to SAP’s core HCM offerings as well as SAP’s strong cloud assets: SAP Business ByDesign for the suite cloud market and SAP’s line of business cloud offerings for large enterprises such as SAP Sales on Demand.

“The cloud is a core of SAP’s future growth, and the combination of SuccessFactors’ leadership team and technology with SAP will create a cloud powerhouse. The acquisition will help us address the top priority for CEOs globally – managing people and talent,” said Bill McDermott , Co-CEO, SAP. “Together, SAP and SuccessFactors will create tremendous business value for customers, with potent synergies to accelerate our growth in the cloud.”

“The depth and experience that SAP brings to customers via our cloud and on-premise portfolio fit elegantly with SuccessFactors’ world-class expertise in providing high-performing, low-cost, native cloud applications that customers are passionate about,” said Jim Hagemann Snabe, Co-CEO, SAP. “Together, we will lead the industry in providing end-to-end solutions consistently to meet any deployment preference, whether on premise, in the cloud or on device.”

“This is a revolutionary combination of proven capabilities that will allow SuccessFactors to accelerate our roadmap by 10 years, and bring the world’s leading application knowledge and intellectual property to our customers through the cloud, and the largest applications customer base instantly,” said Lars Dalgaard , Founder and CEO, SuccessFactors. “Expanding relationships with SAP’s 176,000 customers with our speed to value, friendly user interface, on mobile devices and the web, and seamlessly delivering more SAP solutions in the cloud will be legendary, as organizations adopt the cloud to improve their business. SuccessFactors has proven we have the technology and people to deliver the world’s biggest cloud deployments in terms of users and countries per customer, and also the most applications per customer from the same flexible scalable cloud platform. The business world is ready for enterprise-class cloud applications and together, we can deliver incredible new innovation for global businesses.”

SuccessFactors is believed to operate the largest scale of paying cloud users with 15 million subscription seats. With more than 3,500 customers in 168 countries, SuccessFactors is growing rapidly, recording 77 percent revenue growth year-over-year in the third quarter 2011 and 59 percent revenue growth year-over-year in the first nine months of 2011. SuccessFactors’ scalable cloud application platform supports organizations of all sizes from dozens to millions of users. With proven deployments in SAP environments at companies in diverse industries, the combination of SuccessFactors and SAP holds significant growth potential considering the more than 500 million employees of SAP customers and its 15,000 HCM deployments.

With headquarters in San Mateo, California , and more than 1,450 employees, the SuccessFactors team is widely regarded for creating innovative technology, generating more than 80 percent of new sales from applications that did not exist five years ago, and as one of the fastest growing leaders in cloud applications. Upon completion of the transaction, the CEO of SuccessFactors, Lars Dalgaard , will lead the cloud business of SAP in addition to his responsibility as CEO of SuccessFactors. SuccessFactors will remain independent and be named “SuccessFactors, an SAP company”. The chairman of SAP’s supervisory board, Hasso Plattner , recommended that Lars Dalgaard be appointed to the executive board of SAP AG.

SAP and SuccessFactors Customers to Benefit from Combined Application and Technology Footprint

The combination of SuccessFactors and SAP will create a comprehensive HCM solution, marrying strength in enterprise applications with people-focused cloud applications.
SuccessFactors’ complementary solutions will be an attractive option for more than 500 million employees of SAP customers.
SuccessFactors’ applications are designed for businesses of all sizes, and offer easily adopted solutions for customers of SAP Business Suite, SAP Business ByDesign, SAP Business All-in-One, and SAP Business One.
SuccessFactors’ cloud expertise and know how, rapid cloud innovation and proven success running large scale cloud deployments will help SAP customers more rapidly adopt cloud applications.
SuccessFactors’ mobile applications combined with the mobile expertise of SAP and Sybase will offer customers a powerful business-to-employee mobility portfolio.
SuccessFactors’ focus on enabling business insight and execution fits well with SAP’s business analytics platform, promising new levels of real time decision making across the enterprise.

Basically, the argument goes like this: Since the protestors in Egypt organized and collaborated via Facebook and Twitter against a government that didn’t understand the tools, companies that don’t embrace social enterprise and collaboration tools like Chatter will wind up like Mubarak — overthrown, or rather defeated by their competitors.

Yes it’s a stretch, but you certainly can’t fault Benioff on the passion and enthusiasm of his delivery. And since it’s a Salesforce.com event — Cloudforce New York — there’s no one to yank him off the stage.

There will also be news. Benioff will talk about a new mission for Radian6, the social media monitoring outfit that Salesforce acquired in March for $326 million. Expect to hear him talk about the “social marketing cloud” quite a bit.

What does that mean? Radian6 will be getting some new features around engaging and messaging sales leads and contacts on Facebook and Twitter and Web forums, and so on. It will have some powerful tools for filtering all the junk that people post and look for places where people are expressing clear sentiment or intent to buy, asking for guidance, or maybe looking for a deal.

In an example Salesforce showed me in a demo yesterday, if someone is looking for an online stock broker and asks their Twitter friends for a recommendation or about a specific broker they’re thinking of, that company’s social media team will see the message, classify it as a sales lead, and can reach out with special offers. The same thing goes for customer service messages. When someone is unhappy about something — say, their cable service — those posts can be automatically assigned to the right person for a follow-up, a special offer, or whatever the case may be.

People so often turn to Twitter and Facebook to give feedback or to express outrage about products these days, and companies are still figuring out how to respond and work with those platforms. It’s all about protecting brands.

Benioff’s talk takes place against the backdrop of a lot of uncertainty around Salesforce’s share price, valuation and growth prospects. Salesforce stock has been slapped around a bit following an earnings report that analysts didn’t exactly love, yet you can’t deny its revenue growth rates are impressive: Salesforce is on its way to being a $3 billion company next year.

The problem with Salesforce is how the market should calibrate its valuation. The shares have traded as high as $160 and as low as $109 this year, and closed yesterday at $110.58. Premarket sentiment this morning shows Salesforce stock headed up about 3 percent as of 8:08 am ET. Some people — namely hedge fund manager Whitney Tilson — have argued that Salesforce is fairly valued at about 75 percent lower than where it’s trading now. Expect Benioff’s comments today to give the shares a lift. But given how volatile the shares have been, don’t expect it to last.

In recent weeks, Apple has been looking to recruit senior-level executives with backgrounds in Web-based software, according to people familiar with the matter. It has approached at least one prominent Internet entrepreneur since at least earlier this year about a possible position, according to these people, who say the details of the possible job were unclear. The company has also discussed its needs with recruiters, one of the people said.

Read the rest of this post on the original site »

I can’t report that it does. I spent several hours futzing with the service last night, and found it balky. But I’m guessing that, just like its iCloud launch last month, Apple will work out many of the kinks over the next couple days.

In the meantime, sometimes iTunes Match did what it was supposed to do: It moved my songs — whether I bought them from Apple, acquired them legally somewhere else or flat-out stole them — from my computers to Apple’s servers. Then it let me move the files back down again to my iPhone and other machines.

That’s useful for me, and worth the $25 annual charge. But it’s great for Apple.

Because now my computer, my phone and several other devices are even more closely bound by iTunes than they were before. And it’s happening just as rival cloud services are trying to bust up Apple’s hold on my media.

Tomorrow, for instance, Google is set to finally unveil its Google Music service, which is supposed to combine a cloud/locker offering with the ability to share songs with friends who also use the service. Yesterday, Amazon started shipping its Kindle Fire tablet, which is both a media consumption device and a media obtainment device — designed to get me to buy more media from Amazon.

Meanwhile, Spotify has been pushing me — with an insistent assist from Facebook — to use its music service for free, with the hope that I’ll become so deeply enmeshed that I end up paying $10 a month for a premium account.

None of these rival services preclude me from using Apple and iTunes. In fact all of them will work, at least initially, with iTunes songs (video will be another story). And it’s possible for me to maintain parallel cloud systems if I really want to. I could use Spotify as a discovery tool, for instance, and iTunes as my gotta-have-it archive. But I’ve got limited time and attention, so the reality is that I’m going to end up picking one cloud and sticking with it.

I’ve been working with iTunes since 2001, so Tim Cook already has a very long lead — long enough that he can get away with charging me $25 a year to make it even harder for me to leave. The new guys are going to have work very hard to pull me away.

[Image via: instruct9r/Shutterstock]

Except when you have to use to the Cloud to get all the media you love.

Confused? Not surprising. Barnes & Noble’s messaging around the Nook, which launched today, is a bit muddled. But let me try to spell it out for you:

Unlike Amazon and its Kindle Fire, Barnes & Noble isn’t marketing its tablet with a proprietary cloud service that will get you access to music, movies and TV shows. Instead, the bookseller is leaving that up to other cloud-based services, like Netflix and Pandora.

But make no mistake — these are cloud-based services. Which means you’re almost always going to need an Internet connection to make them work.

And while Barnes & Noble is playing up the fact that its tablet comes with twice the storage capacity of the Kindle Fire, it doesn’t really think you’ll use that storage for music and video.

That is: You can “sideload” media you own onto the Nook from your PC or another device. But the company doesn’t think you will. It thinks you’ll stream your stuff instead.

In order to move movies and TV shows on the gadget, for instance, you wouldn’t be able to use any digital video you bought from Amazon or Apple. Instead you’d have to get your hands on unencrypted MP4 video files, or something similar. And if you know what that means, or how to do it, you’re not the Nook’s target audience.*

And while it’s possible to move music from your iTunes collection onto the machine, B&N doesn’t think you will do that, either.

Here’s a transcript of the brief exchange I had with B&N CEO William Lynch after his press conference, because I wanted to make sure I understood the company’s take:

Peter Kafka: Do you expect regular users to move media from their device to a Nook, or do you think most of them are going to get music and movies via Pandora and Netflix?

William Lynch: Probably more of the latter. Just because they have most of their libraries … I mean, you have a level of sophisticated user that does the former. But as I said, if you look at Netflix, they have 30 million [sic] subscribers..

Kafka: Right. And if I have music on iTunes, can I move it onto the Nook?

Lynch: You can take your MP3 and MP4 players …

Kafka: So I can convert it to an MP3, and move it …

Lynch: And move it, sideload it.

Kafka: OK. So it’s not really a mainstream use. You expect most people to stream music and movies to the device.

Lynch: That’s right.

After this conversation I triple-checked with B&N’s PR reps, who tell me that customers shouldn’t have to convert iTunes files, because most of them will already be in DRM-free AAC format. But the fact that the company’s CEO thinks they won’t want to sideload anyway is the real takeaway.

[UPDATE: Subscription music service Rhapsody, which will work with the Nook Tablet, tells me users will be able to cache some songs for offline play, so the storage capacity could put to use there. I've asked MOG, another Nook-compatible subscription service, if they're doing offering the same thing.]

There’s nothing wrong with that approach, theoretically. But if you’re not going to store movies on the device, then B&N shouldn’t argue that you could watch 5 HD movies on a long airplane flight, on a single charge, since you wouldn’t have any way of actually getting them (good luck streaming HD movies on airplane wireless). And it shouldn’t tell us that we could watch up to nine hours of video on the machine with wireless off, for the same reason.

It’s also a bit odd for B&N to play up its access to Netflix and Pandora, since those are two of the four apps that Amazon all but promised it would have on the Fire. (To be fair to B&N, it is also offering access to Hulu Plus, and Amazon hasn’t said boo about that.) And again — those are cloud-based services, which means they ought to be careful about reminding us that “people aren’t always connected to the Cloud,” which they did repeatedly throughout their press conference.

Product claims aside, the real story behind the mixed messaging seems to be that B&N still fundamentally views the Nook as a reading device which will let you read the stuff it sells. And you will be able to store lots of that stuff on the Nook, which means you won’t need Internet access to get it.

Digital books, magazines, etc., are a $65 billion to $70 billion market, Lynch said during his press conference. And that’s plenty for him for the time being: “We’re not going to launch something where we don’t think we can add material value just to get into the game.”

Reasonable enough. But Jeff Bezos and company are very much in that game. And if Lynch decides he wants to play later, he’ll have to play catch-up.

*B&N’s target audience is a woman with 2.3 kids, Lynch said after the event. So at the risk of perpetuating a stereotype, I’m going to assume that the advice a B&N rep gave me today — to rip a DRM-free MP4 from a DVD, then port it to the tablet — isn’t the one it’s going to bring up very often in its marketing materials.

As I noted last week, the new Nook will (reportedly) boast more speed and memory than Amazon’s tablet, and the assumption is that Barnes & Noble will argue that those specs are worth the extra money.

But unless Barnes & Noble has kept this part a real secret, the bookseller won’t offer a cloud service that’s anything like the one that Amazon has built.

Amazon is building up a semiclosed ecosystem, which will work best if consumers rely on it for access to not just books, but music and movies as well. Apple is building its own take on this idea, and Google is headed this way, too. But Barnes & Noble seems like it will ask consumers to rely on third-party services, like Hulu and Grooveshark, for access to songs and videos.

It’s entirely possible that all of these distinctions will be lost on people looking for a cheap-ish gadget that will let them read books and surf the Web. And presumably* both the Nook and the Fire do just fine when it comes to that.

But it will be interesting to see how Barnes & Noble treats the “C” word this morning. We’ll have live coverage starting around 9:45 a.m. ET.

*It’s important to remember that Amazon didn’t let any of the press that attended its Kindle Fire unveiling actually touch the device, so most of us are still fuzzy about how the thing actually works. I’m guessing that Barnes & Noble, which is (supposedly) going to start shipping its devices within a week, will let us feel up the Nook a bit today.

Levie was in town to meet with Box.net customers and to talk a little about the Box Innovation Network, which will encourage companies to build applications around Box.net, the file sharing and collaboration cloud service that has won business from 100,000 companies, including 77 percent of the Fortune 500.

Too often, Levie says, companies build their applications for collaborating and sharing content around Microsoft SharePoint, or roll their own custom apps. “So what we’re trying to do is offer people a better environment to build those applications; much better than Sharepoint, and far better than anything on the market,” he says. “We’re going to run everything from the storage to the content management to the security — all of the nuts and bolts pieces that make building applications really annoying and not strategic, so you can go focus on the strategic part.”

Box already has some pretty good partnerships. As NetSuite CEO Zach Nelson noted yesterday, Box is one of that company’s partners, as is Google Apps, the cloud-based office application suite that is turning more companies away from Microsoft Office. And Salesforce.com is not only an investor but has been a Box partner since 2009.

More details about the Box Innovation Network will be forthcoming soon — including the names of the development partners Box is working with — so stay tuned. Levie talked about that, and about his longer-term plans for Box, on The Wall Street Journal’s “Digits” show yesterday:

]]> http://allthingsd.com/20111104/box-net-ceo-aaron-levie-takes-his-show-to-new-york/feed/ 0 http://allthingsd.com/20111031/the-enterprization-of-consumer-apps/ http://allthingsd.com/20111031/the-enterprization-of-consumer-apps/#comments Mon, 31 Oct 2011 22:00:04 +0000 Nick Mehta http://allthingsd.com/?p=138453 The classic Eddie Murphy/Dan Aykroyd comedy “Trading Places” explores what happens when people from completely different walks of life switch places, in that case over a $1 wager. In the technology world, we are witnessing a similar swap.

Many industry pundits have talked about the Consumerization of the Enterprise — the idea that enterprise users expect the mobility, integration and ease of consumer technologies in their work lives. People often cite the move to user-purchased mobile devices like the iPhone or user-provisioned collaboration services like Box, DropBox and Yammer as evidence of this phenomenon. And because many of these services have freemium models, IT departments are finding that huge numbers of their employees are already using these services for business purposes in addition to personal ones. So in many ways, consumer expectations are driving the ways enterprise CIOs think.

But what about the other side of the phenomenon? Eddie Murphy’s character Billy Ray Valentine influenced Dan Aykroyd’s character, Louis Winthorphe, III, as much as the reverse. What’s less discussed — but equally fascinating — is the impact of enterprise requirements on the consumerization trend.

Many of the aforementioned start-ups initially focused entirely on end-user needs, providing simple user interfaces and sign-ups, and building multi-million user customer bases in the process. But as these vendors switched focus from user acquisition to monetization, they realized some IT department requirements are legitimate, and more importantly, are barriers to sale.

The most recent example: Box. Box founder Aaron Levie probably never imagined his company would be working with enterprise IT directors in designing his product roadmap when he started his file sharing company, but nonetheless it recently announced partnerships and integrations around identity federation, mobile security, e-discovery, and other IT-centric areas.

In contrast, DropBox has continued to focus heavily on end-user adoption with limited IT focus. Indeed, their total reported user counts dwarf those of Box or any other service. Yet the CIOs I’ve spoken with had a proliferation of users on DropBox and Box when they decided to standardize on a collaboration service. Despite the fact that their companies may have had more DropBox users, Box’s enterprise functionality tipped the scale in its favor. So while user adoption gets you in the door, without some enterprization you don’t get the sale.

Similarly, for Google’s Enterprise team, bringing Gmail to companies involved a lot more than just learning how to charge for the service. Google has spent the past several years trading places with Microsoft, investing in policy management, security, compliance and other IT-centric functionality to address early inhibitors to adoption. And it has worked. Analyst firm Gartner now sees Google as a viable alternative to Exchange for enterprise collaboration.

Indeed, even in the truly consumerized world of mobile devices, iPhones and Androids don’t roam free in most large companies. Many security-sensitive organizations are investing in Mobile Device Management (MDM) solutions like those from Good, MobileIron, Zenprise and Symantec, to bring enterprise manageability to smartphones.

The Enterprization of these traditionally consumer apps is going to center around three legitimate enterprise requirements:

1. Data ownership: While enterprises are excited to leverage the flexibility and fluidity of cloud apps, the idea of an enterprise’s intellectual property spread across hundreds of cloud services, many times in user-provisioned accounts where the enterprise has no access, is scary. What if the company is involved in a lawsuit and has to put a user’s data on legal hold? How can the company recover data if the cloud service loses it? And most importantly, how can the company get its data back if it wants to change services? Tough questions if the data is trapped behind a user’s personal cloud account.
2. Data security: Similarly, the thought of sensitive customer information living in cloud accounts where users choose passwords like “password” or, for the more secure, “password1,” is nerve-wracking to a security officer. How can the company ensure that its data is protected with strong passwords? When an employee leaves, how can the company revoke access to all cloud apps at once? Without company administrative rights, the enterprise is dependent on the judgment of the user.
3. Data compliance: Whether data is stored on your G:\ drive or in Gmail, if it’s work-related, for the most part the same compliance rules apply. While SOX, FRCP and GLBA are not as sexy as FourSquare, Angry Birds and AirBnB, they are still critical for most companies. How can companies meet regulatory requirements around searchability, records retention, logging and other areas?

The real challenge as start-ups address the needs of enterprises is to maintain the core value that earned users in the first place. If they add every feature IT asks for, will the products lose their usability? If they make it easier to lock down access to the systems with two-factor logins when you can’t remember one factor, will users revolt? If these tools were used to get around IT, will the fact that they can now be monitored scare users away?

Time will tell. But this grand experiment would make the “Trading Places” brothers proud. And a lot more than $1 is at stake.

Nick Mehta is CEO of LiveOffice and has served in senior operating roles in the enterprise and consumer technology markets for much of his career. He spent more than five years at Symantec Corporation and Veritas Software Corporation (now Symantec), where he served as vice president and general manager of the Enterprise Vault information archiving and discovery software business.

]]> http://allthingsd.com/20111031/the-enterprization-of-consumer-apps/feed/ 3 http://allthingsd.com/20111031/seven-questions-for-sap-co-ceo-bill-mcdermott/ http://allthingsd.com/20111031/seven-questions-for-sap-co-ceo-bill-mcdermott/#comments Mon, 31 Oct 2011 20:32:42 +0000 Arik Hesseldahl http://allthingsd.com/?p=138454 With the European debt crisis still not resolved, you’d think a European company like SAP would be playing it safe. However, there’s not a cautious note in anything Bill McDermott, SAP’s co-CEO, says.

Having last week reported that quarterly earnings surged — in part because it’s likely to pay smaller legal damages to Oracle than had been expected following the TomorrowNow lawsuit — SAP showed strength across all its geographic regions as sales of its software licenses increased 28 percent.

The next day, McDermott stopped by my office in New York, where we talked about SAP’s plans for the cloud and mobile applications. But first I asked about SAP’s role as one of two targets that cloud application companies like Salesforce.com and Workday are gunning for.

AllThingsD: Business at SAP seems pretty good, as your recent quarterly results bear out, but you have all these different companies gunning for you. Whether its Marc Benioff at Salesforce.com or Aneel Bhusri at Workday, and several others, they all say they want customers from Oracle and SAP. You’ve got a lot of these high-protein customers that everyone wants to take away from you. What does that mean for you?

McDermott: If you look at the market we serve, we have 176,000 customers, and the best names in the world run SAP. It’s no mystery that a Salesforce or a Workday or any number would want to take some of that away from us. They want a bite at that apple. The difficult thing to replicate is what it took 40 years to build. The big themes we have in our favor is one, we have this consistent core platform. If you think about it, you’re a CEO, you have a company, you build things, you have financials, you have supply chain, you have customers, you have suppliers, and on an end-to-end basis you have to make the business network logistically sound and operationally excellent because there’s a lot of endpoints, and margin points in doing that well. And by the way, if you don’t do it well, odds are your competitor will and you’ll lose the game. This is a foundational layer. That took 40 years to build into a masterpiece.

And so what are some of the newer themes?

One recent trend that’s important is this idea of the real-time enterprise. Most of these companies are dealing with heterogenous environments for one reason or another. They had legacy systems, they bought other companies, they’ve done things with maverick buyers, so they have a lot of stuff. They’re looking to aggregate all their data into one comprehensive master data strategy. That’s where the magic of the platform happens because if I can get the data aggregated in the right way I can ask the platform any question I want. So we layered on business analytics technology and this thing called HANA, the high performance application appliance, puts all that information in main memory, so you don’t have to go to the disk to get your data. It’s right there in main memory. For example, let’s say I’m an auto manufacturer and oil prices spike. Smaller cars are going to sell better than big ones and so my mix is going to shift accordingly. What’s that mean to my earnings per share? In the old days that would mean lots of analysis and lots of spreadsheets and after three months you get sort of an answer. Now you can just ask the system the question and it will give you the answer based on data.

When I think of SAP I think of an older-world type of software that has to run on-premise, and as we both know that’s a model that’s constantly under attack from people who say the cloud is where it’s at. But SAP has its own cloud strategy and product, doesn’t it?

We also have our own cloud strategy. And we have a serious plan to promote SAP Cloud. And in that cloud we’re going to unleash Business ByDesign. We’ve been on a slow roll to 1,000 installs this year. That is the commitment we’ve made. The beauty of Business ByDesign for small- and mid-sized companies is that it does all the things an on-premise suite can do except it does them in the cloud. So we’re going to let the tiger out of the cage. The second thing we have is Sales OnDemand. It’s very like Facebook in its orientation. It’s a people-friendly app. The sales professionals love it. It doesn’t take a management hierarchical point of view. This is taking a more people-to-people, community-to-community approach, where you’re in pursuit of a sales opportunity and everyone in the flow who needs to participate. We think that is going to make a big difference. So far the feedback is that the customers love it.

Is this essentially a case where you have a cloud offering and it’s really just not promoted all that well?

Yes. I think there’s a lot of it that we don’t market and there’s a lot that we’re assembling for scale right now. And that’s because we see a market opportunity. When we look at the participants in the market, we’re not overwhelmed, and let’s leave it at that. We want to turn on our best SAP playbook and get busy being the standard in the cloud. We think we can do it in business applications.

Then lets talk about applications. Where do you see your strengths and weaknesses relative to the competition?

That’s an important part of this quarter. We chose an innovate-the-future versus a consolidate-the-past strategy. Others chose to buy companies, consolidate them, rationalize the headcount, leverage the margin and improve shareholder value. It’s a viable strategy. But what we chose to do was to innovate and let that be our guidepost. And we think if we can innovate and make the customer the first, middle and last part of our story and encourage a large part of our ecosystem to do the same, the customer can see the difference between consolidation and innovation. I think customers are seeing a new SAP in terms of attitude and speed of execution.

SAP is also widely exposed to Europe and yet you seem to be hanging in there nicely. The conventional wisdom says you’d be worried sick about the economic troubles on the continent. What are you seeing in Europe, good and bad?

I’m hanging in there because — take a company like Carlsberg, the beer company. And they have an interest in point of sale right now. So they’re using SAP to connect on their mobile device at the point of sale to their supply chain so that the shelves are always filled with Carlsberg beer wherever it’s selling so that the customer always has that choice. These companies are living in uncertain times but they’re investing because they know that if they do and others don’t they get a leapfrog advantage. If they don’t do it now, and others do, they lose the game. The companies that invest in downturns and uncertain times always come out the leaders in their industry when things improve. CEOs know this is not a choice anymore. Technology is not just an enabler of business anymore. It often is the business.

So what are your big bets for the time we’re in?

Bet number one, we’re going to remain the world’s leading business software company. We have a 2.5x lead on the number two and we intend to extend that. We are absolutely going to a be cloud player. The SAP Cloud is a real strategy and we’re going to turn the corner on that by letting the world know that we’re here and we’re here to win. We have a very interesting company in terms of database technologies. HANA is part of that, but we also have SyBase. We think we can be a strong player not only on the database side, but also on the main memory side with HANA as the flagship. We believe we’re the mobile business software standard and we’re now the number one and industry standard and we’re committed to remaining the business analytics leader. We have a 1.5 to 2x lead. Those are the five things we’re going to do to absolutely change the world. Whether the European debt crisis is serious or not, we’re not backing down on the strategy. Like I say to all the CEOs who care to listen, don’t let all this make you back off your strategy because if you decide to slow down or sit on your hands and wait for things to improve, you might just get wiped out by your competitors.

]]> http://allthingsd.com/20111031/seven-questions-for-sap-co-ceo-bill-mcdermott/feed/ 0 http://allthingsd.com/20111026/a-bad-day-for-the-salesforce-kool-aid-video/ http://allthingsd.com/20111026/a-bad-day-for-the-salesforce-kool-aid-video/#comments Wed, 26 Oct 2011 21:35:33 +0000 Arik Hesseldahl http://allthingsd.com/?p=137049 Shares of Salesforce.com took a beating today after fund manager Whitney Tilson called the company’s shares overvalued and said he was shorting them.

“A good company but an unrealistic valuation” is how Tilson, the founder and managing partner of T2 Partners and the Tilson Mutual Funds, summed it up in an appearance on CNBC today (video below), arguing that Salesforce could be the next company to fall by 75 percent, a la Netflix.

Hype about the cloud, pushed by CEO Marc Benioff, whom Tilson called a “world-class salesman,” is giving way to the fact that Salesforce has what he calls “a nice app to help mid-market companies manage their sales force.” Its other lines of business — including Chatter, its social application, and its plans for pushing into larger-sized enterprise companies — just don’t justify its huge market cap, which was until today north of $17.5 billion. Today, Salesforce’s market cap was about $800 million smaller as the shares fell by $6, or 4.6 percent, to $123.56.

Tilson is betting that Salesforce’s fair value is about 75 percent lower than its current trading range, which, based on Tuesday’s closing price of $129.56, would put it at about $33 a share.

It’s been hard not to wonder when the Salesforce valuation rocket was going to run out of fuel. Two years ago, Salesforce was trading at $59 a share, and in July peaked just above $159 a share, amounting to a surge of about 170 percent. But since the start of 2011 the shares are down 7 percent (which in fairness includes today’s drop), while it has traded at a seemingly ridiculous 600-plus times trailing year’s earnings.

Benioff and Salesforce have usually had a friendly platform at CNBC. Jim Cramer, the exuberant two-fisted host of its “Mad Money” investertainment show has hosted Benioff numerous times and even admitted that while Salesforce seemed like “Kool-Aid,” he was not only drinking it, but “liked the taste of it.”

Indeed, Salesforce is growing its sales — Benioff recently said it’s on track do $2 billion in sales this fiscal year — but it has been doing so at a loss. It reported a $4.3 million loss on $546 million in sales in its July quarter. Benioff has argued that Salesforce needs to spend now to grow its customer base and to try to take business away from the likes of Oracle and SAP, that he says “don’t get the the cloud.” We’ll see about that. Salesforce next reports quarterly results on Nov. 18.

]]> http://allthingsd.com/20111026/a-bad-day-for-the-salesforce-kool-aid-video/feed/ 0 http://allthingsd.com/20111017/former-data-domain-ceo-frank-slootman-gets-his-old-band-back-together/ http://allthingsd.com/20111017/former-data-domain-ceo-frank-slootman-gets-his-old-band-back-together/#comments Mon, 17 Oct 2011 13:40:38 +0000 Arik Hesseldahl http://allthingsd.com/?p=132782 When we last saw Frank Slootman, the former CEO of the enterprise storage concern Data Domain, he had just joined Greylock Ventures as a general partner. That was in January.

Fast forward to October, and Slootman is not only CEO of a new company, ServiceNow, but is getting his old band from Data Domain — which he sold to EMC in 2009 after a takeover battle with NetApp — back together.

So what is ServiceNow? It was started in 2003 by Fred Luddy, the former CTO of help-desk management outfits Peregrine Systems and Remedy, one of which is now part of Hewlett-Packard, the other part of BMC. The ServiceNow idea is basically to compete with HP and BMC by replacing those old on-premise help desk management applications with a cloud-based software-as-a-service offering.

ServiceNow has grown like crazy, doubling its sales every year for eight years in a row — it now has 500 employees and boasts $130 million in recurring revenue. Slootman joined as CEO in April. And now he’s hired a bunch of his old buddies from Data Domain to join him.

Having earlier in the week tapped Arne Josefsberg — a 25-year Microsoft veteran who was most recently general manager of the Windows Azure service — as its chief technology officer, ServiceNow has just hired a batch of Data Domain guys away from EMC:

• Michael Scarpelli, the former CFO of Data Domain will now be ServiceNow’s CFO.
• Dan McGee, the onetime senior vice president of engineering, will be — you guessed it — senior vice president of engineering.
• David Schneider will be senior vice president of worldwide sales and service, taking the same title he held at Data Domain.

Though people know Slootman primarily for his work in the storage business at Data Domain — which he ultimately sold to EMC for $2.1 billion — he calls his journey into that line of business a “diversion.” Before Data Domain, he was a senior executive at Borland Software. “Before I was a storage guy, I was an applications guy. I worked in the software layer, so this is right in my wheelhouse,” he told me. “People say the cloud is hot, but what’s even hotter is cloud management, because people need software to manage it, and we’re right smack in the middle of that set of issues.”

So what’s the plan for ServiceNow? To kick things up a notch, naturally. “We’re getting the company IPO-ready,” Slootman says. And while it hasn’t hired any bankers yet, it’s not for nothing that Slootman just brought in a team of trusted execs who were along for the ride with Data Domain’s 2007 IPO and subsequent acquisition.

If and when it happens, a ServiceNow IPO will be rather different from so many others in recent history. ServiceNow is already cash-flow positive: It has $70 million in cash on the balance sheet, Slootman says, and started with practically no venture capital. It took a small $2.5 million round from JMI Equity in 2005; in 2009, Sequoia Capital invested by buying out some employees’ shares, and Sequoia’s Doug Leone joined the board of directors.

So what happened at Greylock? “I found out that I don’t have the temperament or disposition or DNA set to be a venture capitalist,” Slootman told me. “A lot of people told me I wouldn’t last, and they knew me better than I knew myself. If you’re going to fail at something, it’s best to fail fast and move on to the next thing.”

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